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CS Professional · CSR and Social Governance · CSR Policy

Kaveri Industries Ltd is covered by section 135. Based on its average net profits, its CSR obligation for the year is Rs 38 lakh. The Board has three directors, one of them independent. Which statement is correct?

The CSR Committee need not be constituted. Where the amount to be spent under section 135(5) does not exceed Rs 50 lakh, the Board of Directors discharges the Committee's functions. The company's Rs 38 lakh is below this limit, though the obligation to spend remains.

  1. AThe CSR Committee must still be constituted with at least three directors including one independent director
  2. BThe CSR Committee need not be constituted, and the Board of Directors discharges its functionsCorrect
  3. CThe company is exempt from CSR spending as the amount is below Rs 50 lakh
  4. DThe CSR Committee must be constituted, but may consist of two directors only

Explanation

Under section 135(9), where the amount to be spent under sub-section (5) does not exceed Rs 50 lakh, the Committee requirement is not applicable and the Board discharges its functions. Rs 38 lakh is within this limit. The spending obligation still remains, so the exemption is only from the Committee, not from spending.

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